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The employer might also be prepared to select a higher bid because there is an expectation of higher quality and reliability. It is just as important for the employer that the tenderer does not suffer the ‘winner’s curse’, since the project will be likely to be impacted negatively as a result of the tenderer trying to rush, cut costs or even become insolvent.

A sealed-bid auction is intended to proceed with tenderers only knowing their bid and not those of their rivals. However, what can happen is that the employer reveals the bids of tenderers to their rivals in an attempt to drive bids down. This turns the design of the auction into more of an English auction, and puts tenderers at a disadvantage compared to the employer. One way of avoiding this in construction is for tenderers to withhold their bid submission until right before the deadline, in the hope that this will prevent their bid becoming common knowledge to rivals.

This occurs when a number of tenderers are involved in the auction process but only one of them places a bid, inevitably making them the winner. The tenderers collude together to rotate the title of ‘winner’ among themselves, meaning they are each assured of winning (unrivalled) a certain amount of work.

This is more common and involves all bar one of the tenderers submitting artificially high bids, while the one tenderer submits a lower bid which is still sufficiently high to ensure they make a profit. This is designed to give the impression of competition.